Results for the year ending 31 August 2019 November 2019 - - PowerPoint PPT Presentation
Results for the year ending 31 August 2019 November 2019 - - PowerPoint PPT Presentation
Results for the year ending 31 August 2019 November 2019 Disclaimer The content of this document (the Presentation) has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000
Disclaimer
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Agenda
Introduction and Highlights Brand Alignment Product Sectors Financial Review Growth Strategy Conclusions
Jeremy Wilson Chief Financial Officer Tim Carroll Chief Executive Officer
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Introduction
Focusrite plc is a global music and audio products group that develops and markets proprietary hardware and software products. Used by audio professionals and amateur musicians alike, its solutions facilitate the high- quality production of recorded and live sound. Founded in 1989 Five brands:
- Focusrite: audio recording equipment
- Focusrite Pro: audio recording and broadcasting
equipment for commercial operations
- Novation: hardware and software for creating
and playing electronic music
- Ampify: Software and content for creating music
- ADAM Audio: studio monitors
Global customer base: 160 territories Over 300 employees
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- Revenue up 12.7% (7.8% at constant
exchange rates1)
- EBITDA2 up 11.1% to £17.2 million
- Year end net cash balance of £14.9 million
after the purchase of ADAM Audio.
- Final dividend of 2.6 pence, resulting in full
year dividend of 3.8 pence, an increase of 15.2%
- Ten new products, including the third
generation of the Scarlett range, and several software upgrades this year
- Completed the acquisition of ADAM Audio in
July 2019 for €18.0 million (£16.2 million)
Highlights for the year ended 31 August 2019
1 The constant currency revenue growth rate is calculated by dividing the sum of all
transactions in FY19, translated at the average exchange rate for the relevant currency in FY18, by the sum of all transactions in FY18, translated at the same average exchange rate.
2 Comprising earnings adjusted for interest, taxation, depreciation, amortisation and
non-underlying items
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Brand alignment
New Creator Market size: $225m-325m
- Very likely to have little or no previous musical knowledge
- Demands an immediate, joyful experience
- Demands ease, accessibility, and convenience
- Wants a user interface (UI) / app that speaks his or her language
- Wants to get better
Aligned brands: Ampify Gateway brands: Novation, Focusrite, ADAM Audio
Passionate Maker Market size: $250m-300m
- May or may not play traditional instruments
- Little or no songwriting experience
- Wants to make “good” music and get better at the craft
- Expectation that new gear will yield quick/positive results
Aligned brands: Novation, Focusrite, Ampify, ADAM Audio
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Brand alignment
Serious Aspiring Producer Market size: $100m-150m
- More than just a hobby
- Strong demands on gear/technology to achieve
professional-level results
- Deeply into technical data/features
- Willing to pay for solutions that can achieve results
Aligned brands: Novation, Focusrite, ADAM Audio
The Master/Facility Market size: $100m-200m
- Highly skilled musician or audio engineer
- Depends on technology to do the job and make a living
- Adopts/refines workflows to optimize efficiency
- Money generally not an issue if the product meets
requirements Aligned brands: Focusrite, Focusrite Pro, ADAM Audio Gateway brands: Novation
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Product sectors: Focusrite
RedNet: Enterprise, Live, Broadcast, Education. Networked Audio over IP
$3,000 upwards
Red: Creative Professional, Music, Post
$2,000 to $3,500
Clarett: Intermediate / Professional user
$400 to $1,200
Scarlett: Mass market interface. Home user
$100 to $500
- Focusrite Pro
- Focusrite
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Product sectors: Focusrite
- Segment growth of 21.5% driven by strong demand
for Scarlett
- Third generation of Scarlett interfaces launched;
remains number one interface in the world
- Clarett gained numerous accolades including best
- verall audio interface in ‘Sound on Sound’
Focusrite
FY19 FY18
£m £m Revenue 57.6 47.4 9
New pic? This one is
- ld Scarlett
Product sectors: Focusrite Pro
Focusrite Pro
FY19 FY18
£m £m Revenue 4.7 4.8
- Overall segment decline of 1.2%
- RedNet grew by 4%
- Red products nearing the end of their lifecycle
- Changes made to the sales organisation
“The reason behind using RedNet is that it’s simple. It just works every day… There’s such an elegant simplicity to the system. If you’re building a post facility, there doesn’t seem to really be an alternative that makes any sense.” Bill Johnston – Vice President of Engineering at The Formosa Group
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Product sectors: Novation
including Ampify
CONTROLLERS
Physical interfaces to control music creation software Grid controllers: Launchpad - $100 to $300. Keyboard controllers: Launchkey - $100 to $250.
STANDALONE
Function on their own as sound generating devices Grid: Circuit - $330. Keyboard: Bass Station II - $400.
SOFTWARE
iOS apps that allow creation of music on iPhones/iPads Freemium iOS apps and add-on packs starting from $1
- Novation
- Ampify
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Product sectors: Novation
including Ampify
- Launchkey range up 13%.
- Launchpad, the leading product range for Novation,
was at the end of its lifecycle, leading to a decline of 11.7% across the segment.
- Replaced since the year end
- Newly-launched SL Mark III 61 and 49 won awards
and accolades from various industry media outlets.
- New flagship synthesiser, Summit, launched at the
very end of FY19.
- Ampify. London innovation software division.
- Music creation tools
- Now over 10.5 million downloads cumulatively
- Crucial part of business strategy going forward:
grow the Group’s software capability
Novation
FY19 FY18
£m £m Revenue 17.7 20.1 “The SL Mark III does indeed change the game for controllers and sets a new benchmark for which future controllers will be judged.” Loopop 12
Product sectors: ADAM Audio
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T Series
Entry level studio monitor: $400- $500 per pair
AX Series
Mid level studio monitor: $700- $2,000 per pair
S Series
High end studio monitor: $1,750-$20,000 per unit
Subwoofers and headphones
Subwoofers: $700-$8,000 per unit SP-5 headphones: $500
Product sectors: ADAM Audio
- Brand equity
- Quality and reliability
- Strong financials:
- 2018 revenue: €12.9 million
- 2018 adjusted EBITDA: €1.7 million
- Similar corporate culture
- Customer-first focus
- Constant innovation
ADAM Audio
FY19 FY18
£m £m Revenue 1.8
- 14
Product sectors: Distribution
- Add-on products within music-making industry but UK
- nly and small overall.
- KRK monitors.
- Products that Focusrite and Novation customers need.
- This is part of our strategy which aims to increase
lifetime value for our customers.
Distribution
FY19 FY18
£m £m Revenue 2.8 2.9 15
- Group revenue up by 12.7% to £84.7 million (FY18: £75.1 million)
- EBITDA up by 11.1% to £17.2 million (FY18: £15.5 million)
- Operating profit up by 7.3% to £12.8 million (FY18: £11.9 million)
- Adjusted diluted earnings per share 21.4p, up by 21.6% (FY18: 17.6p)
- Net cash of £14.9 million (FY18: £22.8 million) after the purchase of ADAM Audio for £16.2
million.
- Final dividend of 2.6 pence, resulting in 3.8 pence for the year, up 15.2% on prior year
Financial highlights for the year ended 31 August 2019
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- North America: up 11.1% to £36.4m (constant currency growth 5%)
- Demand for Novation weaker, exacerbated by the trade war and
price increases
- Some extra shipments in August ahead of further tariff increases.
- Third generation Scarlett performed well.
- EMEA: up 14.6% to £34.0m (constant currency growth 12%)
- Growth across most countries
- Pronounced growth in Focusrite products but Novation declined
- Rest of World: up 12.5% to £14.3m (constant currency growth 5%)
- Strong growth in Asia despite regional impact of trade war with US
- South America: modest growth despite volatility
FY19: Regional performance
Revenue
FY19 FY18
£m £m North America 36.4 32.7 Europe, Middle East and Africa 34.0 29.7 Rest of World 14.3 12.7 Consolidated revenue 84.7 75.1 17
- Revenue up 12.7%
- Constant currency growth 7.8%
- Third generation of Scarlett
- Gross margin 42.2% (FY18: 42.2%)
- Enhanced margin in first half of
year in the US
- Further tariffs led to lower margin
in second half
- EBITDA up 11.1% to £17.2m (FY18:
£15.5m)
- Tax 10.4% of profit before tax
- R&D benefit continues to help
Income Statement
FY19 FY18 £m £m Revenue 84.7 75.1 Cost of sales (48.9) (43.4) Gross profit 35.8 31.7 Operating expenses before non- underlying items (22.3) (20.1) Operating profit before non- underlying items 13.5 11.6 Non-underlying items (0.7) 0.3 Operating profit 12.8 11.9 Net financing income/ (charges) 0.2 (0.2) Profit before tax 13.0 11.7 Tax (1.3) (1.2) Profit after tax 11.7 10.5 Operating profit before non- underlying items 13.5 11.6 Add back depreciation and amortisation 3.7 3.9 EBITDA 17.2 15.5
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- Intangible fixed assets:
- Acquisition: £12.0m of identified intangible
assets + £4.9m of goodwill
- Remainder largely Focusrite cap'd R&D
- Working capital 20% of revenue
- Inventories now includes ADAM £3.1m
- Debtors higher due to significant sales of
Scarlett close to the year end.
- Current liabilities up by £5.8m to £16.9m
(FY18: £11.1m)
- Greater purchases of stock closer to
FY19 year end.
- No change in supplier payment terms or
- ur aim to pay suppliers according to
their terms.
- Non-current liabilities includes deferred tax on
acquisition of £3.5m
Balance Sheet
FY19 FY18 £m £m Intangible assets 24.1 6.0 Tangible assets 1.6 1.3 Total non current assets 25.7 7.3 Inventories 15.2 11.4 Debtors and other investments 18.2 13.4 Cash 15.5 22.8 Total current assets 48.9 47.6 Total assets 74.6 54.9 Capital and reserves Share capital and other reserves 1.6 1.7 Retained earnings 51.8 41.7 Total Equity 53.4 43.4 Current liabilities 16.9 11.1 Non current liabilities 4.3 0.4 Total liabilities 21.2 11.5 Total equity and liabilities 74.6 54.9
19
- Working capital increase due to the acquisition
and business growth
- Investing £19.9m, (FY18: £4.5m)
- Acquisition of ADAM
- Capitalised R&D £3.8m (FY18: £3.0m)
- Free cash flow before acquisition 12.0% of
revenue
- Long term average 9-10%
- Closing net cash £14.9m after acquisition,
compared to £22.8m at FY18
- Also HSBC revolving credit facility of
£10m
Cash flow
FY19 FY18 £m £m EBITDA 17.2 15.5 Movement in working capital (2.6) (0.2) Operating cash flow 14.6 15.3 Interest received/(paid) 0.2 (0.1) Tax paid (0.8) (0.5) Net cash from operating activities 14.0 14.7 Investing (19.9) (4.5) Free cash flow (5.9) 10.2 Proceeds from share issue
- 0.3
Dividends (2.0) (1.7) Net change in cash (7.9) 8.8 FX movement
- (0.2)
Opening cash 22.8 14.2 Closing cash net of overdraft 14.9 22.8
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Focusrite Growth Strategy
Grow the core customer base
The number of musicians not yet using technology to sculpt, perform or capture sound
- utnumbers those who do by as many as 14:1. Through innovation, disruptive technology and an
unfaltering focus on our customers’ needs, we can change this. Our more accessible and rewarding music-making experience will enable anyone to join the growing community of music makers.
Increase lifetime value for our customers
We will increase the lifetime value for our customers by maximising the value they get from making music. We believe in the positive impact of being immersed in making music. Through a deeper understanding of our customers, our refined, integrated and augmented solutions will help to create the most immersive and rewarding music-making experience.
Expand into new markets
There are places in the world where the barriers to creativity are greater. Equally, there are creative minds that we’ve yet to support. We aim to remove the barriers to creativity for a whole new audience. 21
- Innovations that make music-making and audio
production accessible
- Disruptive technology that genuinely challenges
the status quo
- Perfectly integrated hardware and software that
tackles our customers’ pain points
- ‘Best choice’ solutions to fit every budget
Grow the core customer base
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- Expansion of core products into new
verticals:
- Podcasting, streaming
- Geographic expansion:
- Regional based personnel
- Localisation initiatives
- Closer touch with end-users
- Acquisition of more businesses that fit both
strategically and culturally.
Expand into new markets
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Lifetime value for our Customers
- Lead the industry in putting the needs
- f the music-maker and audio engineer
first
- Offer software and content to augment
and enhance their creative process
- Create a connected experience that
pulls their music-making environment together
- Support them on their creative journey,
adding value through all the right music- making tools
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- Revenue up 12.7% to £84.7 million (FY18: £75.1 million)
- Focusrite strength continues, boosted by third generation Scarlett
- Novation declined ahead of key product launches around the year end
- All regions grew
- Group remains mindful of macroeconomic factors - strategies in place to respond
to future developments
- Major product launches across key ranges
- EBITDA up by 11.1% to £17.2 million (FY18: £15.5 million)
- Net cash balance of £14.9 million (FY18: £22.8 million) after acquisition of ADAM
- Full year dividend of 3.8 pence, up 15.2% on prior year
- Look forward with continued confidence
Conclusions
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Enriching Lives Through Music
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